How to depression-proof your career in banking

What does COVID-19 mean for your career in banking? In the short term, your job may appear safe: banks like Goldman Sachs, Citi, HSBC, Morgan Stanley and Deutsche Bank have promised to pause job cuts while the virus wreaks havoc. Longer term, however, you may need to be strategic to survive.

In this year's Blue Paper, analysts and Morgan Stanley and Oliver Wyman say that even in their most optimistic scenario, earnings for banks are likely to fall by 100% this year. In their least optimistic scenario, they predict that banks' earnings will fall by 277%, with credit losses of $200-300bn. And in their 'central scenario,' they predict that average returns will drop to as low as 4-5% for the industry as a whole, with returns at lower quartile banks close to zero.

As COVID-19 plays out, banks will therefore need to make some changes. And if you want to survive, it will help to be on the right side of them.

Short term: avoid IBD, work in macro trading. Long term: avoid macro trading, work in IBD or credit

Needless to say, it's almost impossible to switch between divisions in the front office (and certainly to switch between IBD and markets) but the Blue Paper does at least offer a guide on how different front office banking jobs are likely to be impacted by the COVID-19 depression over time.

Initially, it says macro traders (rates and FX) should do well from volatility and 'severe market dislocations' while other product areas are expected to lose out. Longer term, however, macro traders are expected to suffer while credit, equities and investment banking revenues bounce back.

Beware regulatory and control functions

Which ever scenarios transpires, banks are going to need to cut costs and the Blue Book suggests this is where they'll look to cut them.

The analysts at Morgan Stanley and Oliver Wyman estimate that only 20% to 30% of today's banking cost base is flexible and that only 5% to 10% can be realistically exited in the near term (compared to over 20% after the financial crisis). This means that banks are going to look hard for areas where costs can be taken out comparatively painlessly. 'Structural inefficiencies in the infrastructure and control functions' are the key candidate. "A reduction of 50% of the headcount in these areas over time is a realistic ambition," say the analysts.

Beware technology change functions

As banks revisit what is and isn't necessary, they may drop some of their technology change agenda. The Blue Paper estimates that IT change spend currently accounts for around 5% to 10% of banks' cost base, so the temptation to cut here is likely to be significant. Beware being staffed on long term projects without benefits that will accrue immediately.

Reinvent yourself in Environmental, Social and Governance (ESG) investing

The Blue Paper predicts that COVID-19 will be a shot in the arm to ESG-oriented businesses. Everything from ‘green bonds’, to sustainable investment funds, green crowd-funding and climate-related risk management is likely to be in greater demand in future. If you can make the transition to ESG now, you should have a job in the storm that follows.

Move to data management and cloud jobs

Although some technology change jobs look exposed, jobs in data management and data transformation should be safe. The Blue Paper estimates that the benefits from having 'clean, consistent and automated data management' could equate to cost savings of between 2% and 4%.

Similarly, the analysts estimate that hosting data on the cloud offers banks the opportunity to 'materially reduce' tech budgets, 'given the reduced cost of computing, the replacement of point-to-point interfaces and the increased ability to develop and automate release management.'

Both cloud jobs and related data jobs therefore look safe.

Move to a fintech

Lastly, the Blue Paper suggests that the world after COVID could be beneficial to fintechs as banks look to outside providers to help them automate. Clearly not all fintechs will survive, but the analysts suggest that fintechs in areas like trade execution, which are following fast on the heels of a first generation that offered post-trade services, could do well from banks' coming eagerness to cut costs.

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